UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended September 30, 1999
Commission file number 33-36670
HIDENET SECURE ARCHITECTURES, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-3061278
(State or other jurisdiction of (I.R.S.
incorporation or organization) Employer Identification No.)
103 Medinat Hayehudim Street, POB 837, Herzliya Israel 46733
(Address of principal executive offices) (Zip Code)
011-972-9-957-9795
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [_] Yes [X] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.025 par value, 4,639,600 shares outstanding as of March 15, 2000
Traditional Small Business Disclosure Format (check one): [X] Yes [_] No
<PAGE>
HIDENET SECURE ARCHITECTURES, INC.
(formerly known as Savin Electronics Inc.)
INDEX
Page
Part I. Financial Information
Item 1. Balance Sheets
Statements of Operations
Statements of Cash Flows
Notes to Financial Statements
Item 2. Management's Discussion and Analysis
or Plan of Operation
Part II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security-Holders
Item 5. Other information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
DRAFT: 22/3/00
HIDENET SECURE ARCHITECTURES INC.
(FORMERLY: SAVIN ELECTRONICS INC.)
INTERIM FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1999
IN U.S. DOLLARS
UNAUDITED
INDEX
Page
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statements of Cash Flows 4 - 5
Notes to Consolidated Financial Statements 6 - 7
- - - - - - - -
<PAGE>
<TABLE>
<CAPTION>
HIDENET SECURE ARCHITECTURES INC.
(Formerly: Savin Electronics Inc.)
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
In U.S. dollars
September December 31,
30,
1999 1998
------------- -------------
Unaudited Audited
<S> <C> <C>
------------- -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 54,797 -
Prepaid Expenses 194,113 -
------------- -------------
Total current assets 248,910 -
------------- -------------
INVESTMENT IN A SUBSIDIARY 1 1
------------- -------------
FIXED ASSETS:
Cost 30,072 -
Less - accumulated depreciation 376 -
------------- -------------
29,696 -
------------- -------------
OTHER ASSETS 110,000 -
------------- -------------
388,607 1
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIENCY)
CURRENT LIABILITIES:
Short-term bank credit 3,684 -
Accounts payable and accrued liabilities 104,956 58,877
Loan payable - related parties 93,035 7,835
------------- -------------
Total current liabilities 201,675 66,712
------------- -------------
SHAREHOLDERS' EQUITY (DEFICIENCY):
Common stock - $ 0.025 par value:
Additional paid-in capital 1,230,166 943,916
Accumulated deficit (1,144,724) (1,012,117)
------------- -------------
Total shareholders' equity (deficiency) 186,932 (66,711)
------------- -------------
388,607 1
============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
HIDENET SECURE ARCHITECTURES INC.
(Formerly: Savin Electronics Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------------
In U.S. dollars
Three months ended Nine months ended
September 30, September 30,
------------------------- -------------------------
1999 1998 1999 1998
------------ ----------- ----------- ------------
Unaudited
-----------------------------------------------------
<S> <C> <C> <C> <C>
Cost and expenses:
Research and development, 23,346 - 23,346 -
General and administrative 108,740 - 108,940 2,415
Financial expenses 321 - 321 -
------------ ----------- ----------- ------------
Net loss 132,407 - 132,607 2,415
============ =========== =========== ============
Basic and diluted net loss 0.03 - 0.03 0.07
per share
============ =========== =========== ============
Weighted average number of
shares outstanding 4,059,600 32,600 4,059,600 32,600
============ =========== =========== ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
HIDENET SECURE ARCHITECTURES INC.
(Formerly: Savin Electronics Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------------
In U.S. dollars
Nine months ended
September 30,
----------------------------
1999 1998
------------- -------------
Unaudited
----------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss (132,607) (2,415)
Adjustments to reconcile loss to net cash provided by 142,542 2,415
operating activities:
------------- -------------
Net cash provided by operating activities 9,935 -
------------- -------------
Cash flows from investing activities:
Purchase of fixed assets (30,072) -
------------- -------------
Net cash used in investing activities (30,072) -
------------- -------------
Cash flows from financing activities:
Changes in short-term credit, net 3,684 -
Proceeds from issuance of common shares, net 71,250 -
------------- -------------
Net cash provided by financing activities 74,934 -
------------- -------------
Increase in cash and cash equivalents 54,797 -
Cash and cash equivalents at the beginning of the - -
period
------------- -------------
Cash and cash equivalents at the end of the period 54,797 -
============= =============
Non-cash transactions:
- ---------------------
Issuance of shares 300,000
Receivables (180,000)
Other assets (120,000)
------------- -------------
-
============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
HIDENET SECURE ARCHITECTURES INC.
(Formerly: Savin Electronics Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------------
In U.S. dollars
Nine months ended
September 30,
----------------------------
1999 1998
------------- -------------
Unaudited
----------------------------
<S> <C> <C>
Adjustments to reconcile loss to net cash provided by
- -----------------------------------------------------
Income and expenses not involving cash flows:
Compensation in respect of option granted to 15,000 -
Depreciation 10,376 -
Changes in operating asset and liability items:
Increase in receivables (14,113) -
Increase in accounts payable and accrued 46,079 2,415
Increase in loan payable - related parties 85,200 -
------------- -------------
142,542 2,415
============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
HIDENET SECURE ARCHITECTURES INC.
(Formerly: Savin Electronics Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In U.S. dollars
NOTE 1:- GENERAL
Basis of Presentation
The accompanying unaudited financial statements have been prepared by
Hidenet Secure Architectures Inc. in accordance with the rules and
regulations of the Securities and Exchange Commission. These
accompanying financial statements reflect all adjustments which, in
the opinion of management, are necessary for a fair presentation of
the financial position and the results of operations for the interim
periods presented. All such adjustments are of a normal and recurring
nature. The results of operations for the interim periods presented
are not necessarily indicative of the results of future operations.
Certain financial information, which is normally included in financial
statements prepared in accordance with generally accepted accounting
principles, is not required for interim reporting purposes and, has
accordingly been condensed or omitted. The accompanying financial
statements should be read in conjunction with the financial statements
and notes thereto included in the Company's report, filed on Form
10-KSB for the year ended December 31, 1998.
NOTE 2:- INVESTMENT AGREEMENT
In June 1999, the Company entered into an investment agreement
with several investors ("Investors") and a placement agent ("the
Agent"). Pursuant to the agreement, the Investors assigned to the
Company all of their rights, titles and interest in proprietary
technology in the field of network data security, and consulting
services in exchange for the allocation of 3,000,000 of the Company's
shares. In addition, the Agent will act as the exclusive financial
consultant to raise capital in the aggregate of $ 600,000, in two
stages:
Stage A - The issuance of 1,000,000 representing 24.6 % of the
Company's outstanding shares, in return for an investment of $
100,000. (This stage took place in July 1999.)
Stage B - The issuance of 800,000 shares representing 16.5% of the
Company's outstanding shares, in return for an investment of $ 500,000
within 180 days from the completion date of Stage A. This stage can be
executed in portions that for each installment of $ 50,000 the Company
will issue 80,000 shares of Common stock. As a consideration for the
raising of capital, the Agent will receive $ 75,000 per year for one
year, for consulting services $ 10,000 for expenses and 10% of the
gross amounts raised from Investors introduced by the Agent.
In addition, the Agent will receive options to purchase 500,000
Ordinary shares of the Company, at an exercise price of $ 0.125 per
share. The options are exercisable within three years from the
completion date of Stage A.
<PAGE>
HIDENET SECURE ARCHITECTURES INC.
(Formerly: Savin Electronics Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In U.S. dollars
The agreement also states that the Company will establish a subsidiary
in Israel. The subsidiary will engage in research and development. The
Company will assign and transfer to the subsidiary all of its
intellectual property and all funds raised by Stage A of investment,
net of the cost of registration of the shares (The subsidiary was
established in July 1999).
In connection with acting as a consultant to the subsidiary, the Agent
is entitled to 7% of the gross proceeds of any investment made in the
subsidiary, and Ordinary shares of the subsidiary, representing 7% of
the gross proceeds of an investment made in the subsidiary.
- - - - - - - -
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation:
Cautionary Statement for Forward-Looking Information
Certain statements contained in this report, including statements regarding
the anticipated development of the Company's business, the intent, belief or
current expectations of the Company, its directors or its officers, primarily
with respect to the performance of the Company and the products it expects to
offer and other statements contained herein regarding matters that are not
historical facts, are "forward-looking" statements within the meaning of the
Private Securities Litigation Reform Act (the "Reform Act"). Future filings with
the Securities and Exchange Commission, future press releases and future oral or
written statements made by or with the approval of the Company which are not
statements of historical fact, may contain forward-looking statements under the
Reform Act. Because such statements include risks and uncertainties, actual
results may differ materially from those expressed or implied by such
forward-looking statements. Factors that could cause actual results to differ
materially from those expressed or implied by such forward-looking statements
include, without limitation, the failure of the Company to obtain additional
financing, the failure of the Company to develop a product which is marketable,
rapid technological changes in the environment, frequent new product
introductions by others in the industry with greater resources than the Company,
competition in the marketplace in which the Company decided to operate and
evolving industry standards and customer preferences in that market which are
difficult to predict. Not only could the Company fail to produce a marketable
product, but the introduction of products embodying new technologies and the
emergence of new industry standards could render the Company's product, if it is
even developed, as well as any potential new products, obsolete and
unmarketable. Such constant technological changes also make accurate market
predictions difficult. The Company's results depend in part upon its ability to
attract, train, retain and motivate qualified management, technical,
manufacturing, sales and support personnel for its operations. The Company has
no patent protection for its product which it is in the process of developing.
All forward-looking statements speak only as of the date on which they are
made. The Company undertakes no obligation to update such statements to reflect
events that occur or circumstances that exist after the date on which they are
made.
<PAGE>
The Company has never had any revenues since its inception. The Company's
wholly-owned subsidiary, Hidenet Secure Architectures Ltd., an Israeli
corporation, is still in the development stage of a marketable product in the
field of network data security. Said subsidiary is working on a compact,
comprehensive and easy-to-use security software for personal and corporate
markets, specializing in privacy and anonymity among Internet and Intranet
users. The Company has no current operations, and even if the products it is
developing in the networks data security field are brought to market, there is
no likelihood that the sales of the Company's products will be sufficient to
cover the costs and expenses of the Company's operations. The Company estimates
that sales of its products will commence in the third quarter of 2000, but there
is no assurance that its products will be ready for market at such time. In
addition, the failure by the Company to locate additional funding raises doubts
about its ability to continue as a going concern.
On December 28, 1999 IBDH, LLC, a Delaware limited liability company,
purchased all the shares of the Company owned by Jonathan Levin, Uriel Ginsburg
and John Federman. These shares were initially issued by the Company in
connection with the acquisition by the Company of the right, title and interest
in the proprietary technology in the field of network data security owned by
said individuals. IBDH, LLC is owned 80% by Ron Fussman, the President,
Secretary and a director of the Company, and 20% by Uriel Ginsburg. Through his
beneficial ownership of IBDH, LLC, Mr. Fussman owns 62.5% of the Company.
In November, 1999, investors invested $50,000 to the Company in exchange
for 80,000 shares of common stock. In connection therewith, the Company issued
to Royce Investment Group ("RIG") an additional 80,000 shares of common stock.
In addition, the warrant issued to RIG to purchase 500,000 shares of common
stock at $0.125 was exercised by RIG in January 2000. RIG is owned by Mr.
Fussman. See the Form 8-K with date of report June 11, 1999 for a more detailed
description of the agreement with RIG and the Company and the transactions
contemplated thereby.
Year 2000 Compliance
The "Year 2000 problem" describes the world-wide concern that certain
computer applications, which use two digits rather than four to represent dates,
will interpret the year 2000 as the year 1900 and malfunction on January 1, 2000
or thereafter. Since the Company has no operations, the year 2000 problem does
not pertain to the Company. The Company will ensure that its products, and any
products of material significance to the Company, will function normally after
the year 2000.
Part II - Other Information
Item 1. Legal Proceedings.
The Company's wholly owned subsidiary, Savin Israel, was placed in
receivership in August of 1997. See Form 10-KSB for the year ended December 31,
1998 for a further description of such proceedings. The Company is not presently
a party to any other material litigation nor, to the knowledge of management, is
any material litigation threatened.
Item 2. Changes in Securities.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security-Holders.
None.
<PAGE>
Item 5. Other information.
None.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
None.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
HIDENET SECURE ARCHITECTURES, INC.
By
--------------------------------
Ron Fussman, President
Date: March __, 2000
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
President, Secretary and a Dated: March __, 2000
Ron Fussman Director
Chairman of the Board of Dated: March __, 2000
Avrum Savran Directors and
Treasurer
